New proposal to lower drug prices

Rising drug prices have frequently made the headlines over the last few years. There have been different proposals on how to address the issue, including introducing legislation to allow Medicare to negotiate pricing. NPR reported on the current administration's recent proposal: to include drug prices from around the world when calculating the reference price. Apparently, Medicare currently pays for drugs at 106% of the average US sales price of the drugs. Since drugs in the US are often much more expensive than the same drugs in other countries, including the prices of drugs from around the world may dramatically lower the amount that Medicare pays for drugs.

The price discrepancy by nation is a form of price discrimination that allows pharmaceutical companies to set prices according to what each country might tolerate, giving them higher revenue than what they would get if they were allowed to set only one global price. Patient advocates have previously proposed a workaround by allowing the importation of drugs from other countries. This current proposal is another approach that would dramatically affect the price gap.